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Can Nokia Keep Up Its U.S. Promise?

Will Nokia really reignite its focus on North American markets? Can Elop help?

Nokia(NYSE: NOK) intends to win back its market share in the U.S., but the real question is how serious the mobile giant is in its intentions.

Nokia said it wants to "re-enter" the top of the U.S. market and is developing smartphones for American consumer. However, the Finnish company said it won't be building more CDMA-based phones, which run on half the nation's wireless networks. Also, the company has not announced any plans for any U.S.-specific smartphones at its Nokia World trade show in London.

The worlds' largest handset maker has been slow to adapt to the smartphone revolution in the U.S., which has been led by Apple's (Nasdaq: AAPL) iPhone and Google(Nasdaq: GOOG) Android devices. Ever since the iPhone was launched in 2007, Nokia has witnessed a steady erosion of its smartphone market share.

The company's share price has also fallen by almost two-thirds since the iPhone was launched in 2007, wiping about 60 billion euros off the group's market capitalization. Nokia's insistence on designing and selling its devices without operator input, despite the strong presence of wireless carriers like Verizon and AT&T(NYSE: T) in the U.S., has prevented it from gaining traction in the world's largest smartphone market.

In 2006, Nokia controlled 20 percent of the U.S. market. That number has now dwindled to little over seven percent, triggering concerns from investors. Strategy Analytics analyst Neil Mawston said first and foremost is, "Whether Nokia really has the desire to fix the problem."

"We're not happy with our current situation in the U.S., and we're looking for ways to enhance our position in the U.S. market," Colin Giles, senior vice president and head of global sales for Nokia, told reporters.

But, Nokia's steps are not in sync with what it envisions for the U.S. market, and its recent moves would only compound its problems.

For instance, though Nokia unveiled three smartphones -- E7, C7 and C6 -- that run on its Symbian 3 platform at the company's annual Nokia World conference, not a single one will be offered by a U.S. carrier.

Also, the company's flagship model N8 -- touted as Nokia's answer to the iPhone -- is also not being offered by a U.S. carrier, thereby questioning the seriousness of Nokia's intentions about re-entering the U.S. market. In the U.S., customers will have to buy N8 unlocked and then buy a separate SIM card.

While Nokia retails unlocked devices in the U.S. either directly through its Web site, through Nokia stores, or through resellers, those avenues would not match the volumes offered by the operator retail channel. "But Nokia's view is that we think we can attract AT&T as a partner and bring products to market there," Giles said.

At this time, Nokia definitely needs a major operator deal to market its products in U.S. in a large way.

"If we're going to re-enter the U.S. market, we're going to do so as a challenger -- that's where we're at right now," Giles said. "If we're realistic about it, we'll focus on what we do well, and we do wideband-CDMA really well."

One of the Nokia's problems is that it made its products on a global perspective rather than making market specific devices. As a result, Nokia has been slow in launching premium devices to battle high-end rivals like Apple's iPhone and new Android-based phones like Samsung's Galaxy S and HTC Corp.'s Evo 4G.

At the Nokia world conference, which is taking place in London between September 14 and 15, the company said it will not offer a CDMA phone for the U.S. market. This means it will not have access to almost half of wireless subscribers in U.S., who use CDMA services from Verizon and Sprint Nextel. Verizon is the largest wireless carrier in the U.S., and Sprint Nextel is the third-largest, with subscriber bases of 92 million and 48 million, respectively.

With GSM phones, Nokia will be able to have only AT&T and T-Mobile customers. AT&T has 90 million subscribers and T-Mobile serves 38.5 million subscribers. According to IDC, Nokia is struggling in the smartphone market -- Nokia's market share in the smartphone market in the second quarter dipped to 38.1 percent from 40.3 percent a year ago, while Apple, HTC and Samsung saw their market share rise.

Market observers say that Nokia last enjoyed success in 2006 when it launched N95, a smartphone with mass appeal.

"One of the issues we had was not tailoring products well enough to the carriers' needs. And that didn't help us. But we recognize that we need to listen. And we take those requirements seriously now," Giles said.

Nokia has even built a research and development facility near San Diego to build products specifically for North America. But, as of now, none of those products have seen the light of the day. Also, Nokia is still keeping its strategy of using three operating systems -- S40, Symbian, and Meego.

"We believe the global market is able to accommodate all three, and all three are needed for cost efficiency and also sophistication at the high end," Giles said.

Meanwhile, rivals are busy catching up on Nokia's main Symbian platform. According to Gartner, Symbian's market share is expected to drop to 34 percent in 2011 from 40 percent in 2010, while Google's Android is forecast to rise to 22 percent in 2011 from 18 percent in 2010. Apple's iOS is likely to grow to 17 percent in 2011 from 15 percent in 2010.

But, investors hope that Nokia's new chief executive, Stephen Elop, a former Microsoft executive and someone believed to have a good understanding of the North American market, will take the company out of its troubles. Elop, who officially begins on September 21, will be the first non-Finnish CEO ever to lead Nokia.

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